Sun Tzu’s Risk Management for doing Investment

Above is a quote from Sun Tzu’s the art of war. In stock market, you can apply his art to manage your risk of trading. Before I get into the subject. Before I explain how Sun Tzu’s art can be applied into our daily stock trading strategy. There’s good we noticed a few messages from Sun Tzu. Here are the messages:

1. If we know our strength and power of the enemy, in 100 times of war, we will win it all
2. If we know our strength but did not know the power of the enemy, in 100 times of war we will only win half
3. If we do not know our strength and power of the enemy, in 100 times of war, we will always lose.

Sun Tzu’s art in Stock Market

Those 3 messages above (from Sun Tzu), can be applied into Stocks Market . I have some steps regarding Sun Tzu’s art in Stock Market.These steps must be applied before doing some investment:

a. The first thing that must be done by investors prior to start investing in stocks is to “Recognize Ourselves”.

If you are confused about this first step, you can begin to ask yourself with this question “Why do we buy stocks?” Is it for getting a big profit in short time? Is is just for making yourself cool by buying stocks? or By buying stocks is one of the ways to do an investment? . Whatever your motivations, you must have one of them before entering into the market.

b. Knowing our Strength.

We must know our strength before buying stocks such as, “do we have regular income?” ; “Is there money left on every month?” etc. The points of this steps are: That we should use our remaining funds for buying stocks. The stronger our finance, the better because we can choose when to sell our stocks.

c. Knowing our Temperament.

This step is very important, we must know what is our emotion. For example, you may ask to ourselves these questions:

– Are we so selfish and never admit our mistakes?

– Are we too optimistic?

– Are we easy to get angry?

d. What kind of Investor we are?

There are some of kinds of investors such as Technical Investor, Fundamental Investor, Scuttlebutt Investor, Value Investor, etc. You must know what type of investor are you then stick to that habit.